Gold's Bearish Divergence against strong technical resistance
Just a reminder on divergences:
Normal Divergence (Trend Reversal)
Bearish: Higher highs on price action but lower highs on the indicator
Bullish: Lower lows on price action but higher lows on the indicator
Hidden (Trend Continuation)
Bearish: Lower high on the price action and higher highs on the indicator
Bullish: Higher low on the price action and a lower low on the indicator
About the chart:
I simplified the Bollinger band to stop the chart from being to busy. Also the MACD was modified by the script author to focus on the histogram and the MACD stays closer to zero. I don't know what tweaks they made, but I like it.
Analysis
The MACD and RSI and blue lines shows that we have normal divergence in the current peak which suggest strongly that this uptrend has concluded, and there is hidden bearish divergence with the black lines on the RSI which suggest strongly that the overall trend is bearish. We should be looking for a lower low or a double bottom over the next decade, not higher highs.
At the risk of being redundant... The colored arrows show the two touches on price action at two instances of normal bearish divergence. Both of these divergences are important because they are occurring at the upper limit of the two week bollinger band. It is harder to find stronger resistance than such a high time frame bollinger band. The colored pairs of arrows on the price action are clones... they are exactly equidistant from one another which means the timing is the same. In other words, the price action is mature enough to expect a similar reaction from this divergence.
The falling black trend line on the price action shows a clear lower low but the RSI has much more subtle hidden bearish divergence. The all time high on this chart has an RSI of 82.14 and the current high has an RSI of 83.61. I don't care how slight that is, we have hidden bearish divergence. Combining the normal divergence here and the hidden bearish divergence leads me to believe that the next move will be powerfully to the downside. Having the RSI over 70 with bearish divergence is usually a decent sign to go short. Being at the upper limit of the bollinger band re-enforces that.
The volume situation remains poor. The price action has burst through the upper value area and we have a low volume node between us and and sub $1400. This is not a good place to be if you are hoping for a once in a decade bull run. The on balance volume itself is divergent, and the EMAS, which are used to control for the noise in the OBV, are also divergent. An even stronger signal. The MFI (with custom settings) is considered a volume adjusted RSI by some analysts (and investopedia) and that is showing the same divergences.
My Conclusions
My bias is that the gold/silver ratio will go deeper into this rising wedge. I am shorting gold miners via the DUST etf and short silver via its short ETFs. I hope to get out when the 2w RSI is over-sold. Not financial advise, just my plans for right now. I plan on holding through any wicking and price action thrashing around that can occur. I have some take profits/stop losses in other trades I hope to feed this one one.
Normal Divergence (Trend Reversal)
Bearish: Higher highs on price action but lower highs on the indicator
Bullish: Lower lows on price action but higher lows on the indicator
Hidden (Trend Continuation)
Bearish: Lower high on the price action and higher highs on the indicator
Bullish: Higher low on the price action and a lower low on the indicator
About the chart:
I simplified the Bollinger band to stop the chart from being to busy. Also the MACD was modified by the script author to focus on the histogram and the MACD stays closer to zero. I don't know what tweaks they made, but I like it.
Analysis
The MACD and RSI and blue lines shows that we have normal divergence in the current peak which suggest strongly that this uptrend has concluded, and there is hidden bearish divergence with the black lines on the RSI which suggest strongly that the overall trend is bearish. We should be looking for a lower low or a double bottom over the next decade, not higher highs.
At the risk of being redundant... The colored arrows show the two touches on price action at two instances of normal bearish divergence. Both of these divergences are important because they are occurring at the upper limit of the two week bollinger band. It is harder to find stronger resistance than such a high time frame bollinger band. The colored pairs of arrows on the price action are clones... they are exactly equidistant from one another which means the timing is the same. In other words, the price action is mature enough to expect a similar reaction from this divergence.
The falling black trend line on the price action shows a clear lower low but the RSI has much more subtle hidden bearish divergence. The all time high on this chart has an RSI of 82.14 and the current high has an RSI of 83.61. I don't care how slight that is, we have hidden bearish divergence. Combining the normal divergence here and the hidden bearish divergence leads me to believe that the next move will be powerfully to the downside. Having the RSI over 70 with bearish divergence is usually a decent sign to go short. Being at the upper limit of the bollinger band re-enforces that.
The volume situation remains poor. The price action has burst through the upper value area and we have a low volume node between us and and sub $1400. This is not a good place to be if you are hoping for a once in a decade bull run. The on balance volume itself is divergent, and the EMAS, which are used to control for the noise in the OBV, are also divergent. An even stronger signal. The MFI (with custom settings) is considered a volume adjusted RSI by some analysts (and investopedia) and that is showing the same divergences.
My Conclusions
My bias is that the gold/silver ratio will go deeper into this rising wedge. I am shorting gold miners via the DUST etf and short silver via its short ETFs. I hope to get out when the 2w RSI is over-sold. Not financial advise, just my plans for right now. I plan on holding through any wicking and price action thrashing around that can occur. I have some take profits/stop losses in other trades I hope to feed this one one.
And I promise every Floridian that you will all be rich... because we're gonna print some more money! Why didn't anybody ever think of this before?
~Nathan Explosion
~Nathan Explosion